THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

REP. NANCY PELOSI (D), CALIFORNIA: What we were looking for last night, was really the president to take the initiative for a strategy for success. He didn't do that. SEN. JOHN MCCAIN (R), ARIZONA: I think the president did an outstanding job of laying out the situation as it exists.

ANNOUNCER: We'll read between the partisan lines.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The lessons of September 11 -- On September the 11th -- After September the 11th.

ANNOUNCER: The 9/11 connection: The president faces new fire for continuing to make a link to Iraq.

A political war of words. As "War of the Worlds" premiers, why is a lawmaker lashing out at actor Tom Cruise?

Now, live from Washington, CNN's INSIDE POLITICS.

ED HENRY, HOST: Thank you for joining us. I'm Ed Henry.

President Bush often follows a big speech with a day-after public appearance to reinforce his message -- not this time. He is staying behind the scenes today, apparently letting his stay-the-course-in- Iraq address sink in with the public. But his partisan allies and adversaries are out in full force offering sharply divided takes on what he said last night. We begin our coverage with our White House correspondent, Dana Bash.

(BEGIN VIDEOTAPE)

DANA BASH, CNN WHITE HOUSE CORRESPONDENT (voice-over): The president may have gone primetime on Iraq because of pressure from concerned Republicans, but the reviews are falling pretty much along party lines.

PELOSI: I think the president's speech was a rehash, it wasn't anything new. It wasn't what we needed to hear about how the president establishes the milestones to achieve success, to bring our troops home.

BUSH: They are trying to shake our will in Iraq. Just as they tried to shake our will on September the 11th, 2001.

BASH: Aides insist he was trying to illustrate the kind of terrorists responsible for the steady stream of attacks in Iraq now.

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: They have the same ideology of hatred and oppression that the terrorists who attacked us on September 11th held.

BASH: Democrats call that disingenuous, noting the Bush administration opened what it calls the "Central Front on Terror," by striking without a post war plan.

SEN. JOHN ROCKEFELLER (D), WEST VIRGINIA: Come back to the 9/11. Somehow figuring that it clicks a button. That everybody grows more patriotic and more patient. Well, maybe that's good P.R. work, which it isn't, but it's not the way that a commander in chief executes a war.

BASH: Most Republicans didn't see a problem with trying to cast Iraq as part of the post-9/11 fight against terrorism, but some had hoped the president would be more frank about errors in planning that led to this point.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Truth is we made mistakes in judgment under estimating the level of the insurgency; Maybe not having enough troops at the beginning and we've paid a price for that.

BASH: And Mr. Bush did not put an end to calls for more troops in Iraq to stop the insurgency faster, even from Republicans.

MCCAIN: One of the reasons why we've experienced many of the difficulties we have, is we didn't have enough boots on the ground and we still do.

(END VIDEOTAPE)

BASH: The White House and most Republicans say they feel pretty confident that the White House did buy more time with the American people, with the president's speech on patience, on Iraq. But one thing, Ed, it did not do, as you know, is temper criticism from Congressional Democrats. They have made a strategic decision to keep hammering away at the president, when it comes to his Iraq policy.

HENRY: Dana, are we also seeing a strategy -- a shift in strategy, perhaps, last night, moving away from the rhetoric of the vice president in recent days saying that basically he felt that the insurgency was in its last throes. Was there a shift last night? Because the president really didn't really seem to go there.

BASH: The president didn't go there at all and I think you can probably trace it back even further to the defense secretary on the Sunday shows, not only saying: It's not on its last throes, but saying it could be years before the insurgency is really over.

The president -- clearly what the White House wanted to do -- big-picture strategy here, Ed, is to try to, sort of, cut through the different voices that they understand here were coming out of the White House, coming out of the administration; some mixed messages. That was a central reason why the president wanted to go primetime and give this kind of speech.

HENRY: Thank you. Dana Bash, at the White House.

HENRY: While many Democrats are criticizing the president for linking Iraq to 9/11, former president Bill Clinton suggested today that he understand why Mr. Bush is doing that.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: He was there fighting terrorism. There as not -- it wasn't a center of terrorism before Saddam fell, he kept the terrorists out. But he -- the president recognized that terrorism had a greater appeal.

(BEGIN VIDEO CLIP)

HENRY: President Bush has been linking Iraq to the September 11th attacks for quite some time. But as our national correspondent Bruce Morton reports, Mr. Bush now is connecting the dots in a somewhat different way.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): When the United States invaded Iraq, the president and other leaders stressed that Saddam Hussein had weapons of mass destruction which directly threatened the U.S. Americans believed that.

KEATING HOLLAND, CNN POLLING DIRECTOR: Now, we know that there weren't any weapons of mass destruction. The belief in that has gone down tremendously, but on the eve of the war, 55 percent of Americans were certain that Saddam Hussein had facilities to create weapons of mass destruction.

MORTON: And Americans believed Saddam was directly linked to al Qaeda, to the 9/11 attacks on the U.S. Some, even some in the know, still believe that.

SEN. ROBIN HAYES (R), NORTH CAROLINA: Saddam Hussein and people like him were very much involved in 9/11.

MORTON: But most do not.

HOLLAND: In 2002 and 2003 a majority of Americans believe that Saddam Hussein was personally involved in the 9/11 attacks. By 2004, after the various reports had come out, that number dropped dramatically.

MORTON: The 9/11 Commission, for one, found no evidence of a collaborative operational relationship between Iraq and al Qaeda. No evidence of an Iraqi role in the attacks. The British Foreign Office memo in 2002 to Prime Minister Tony Blair finds, "U.S. scrambling to establish a link between Iraq and al- Qaeda is so far unconvincing." Despite what his colleague Congressman Hayes says, Senator John McCain agrees.

MCCAIN: I haven't seen compelling evidence of that.

BUSH: America is...

MORTON: In his speech last night, President Bush used a slightly different rational for being in Iraq: It's where the terrorists are now.

BUSH: ... And we fight today, because terrorists want to attack our country and kill our citizens and Iraq is where they are making their stand.

MORTON: That's so and even the CIA admits Iraq may be a better training ground than Afghanistan was.

PETER GOSS, CIA DIRECTOR: Islamic extremists are exploiting the Iraqi conflict to recruit new anti-U.S. jihadist. Those jihadists who survive, will leave Iraq experienced and focused on acts of urban terrorism. They represent a potential pool of context to build transnational terrorist cells, groups and networks in Saudi Arabia, Jordan and other countries.

MORTON: The irony, of course, is that the terrorists came to Iraq not under Saddam, a dictator who didn't tolerate opposition, they came later in the confusion, the unguarded borders which followed the successful U.S. invasion. They are there because the U.S. toppled Saddam, but then could not impose order throughout the country.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

HENRY: Presidential speeches tend to draw a more partisan audience. and our overnight poll did, indeed, find that half of those who watched Mr. Bush on T.V. last night, were Republicans. About one- fourth were Democrats, another fourth independents.

But even with that Republican tilt, our polls suggest viewers were not all that impressed with this particular presidential address. Forty-six percent of viewers said they had a very positive reaction to Mr. Bush's remark; compared to 60 percent who had a positive reaction to the president's of the State of the Union address.

We'll talk more about Iraq and 9/11, and the president's speech ahead, when I talk to the top Democrat on the House Intelligence Committee, Jane Harman.

And later, influential Senator Sam Brownback will join us with a Republican view on Mr. Bush's speech and a sneak peak at possible Supreme Court retirements. Plus: Will two journalist go to jail for refusing to reveal a source who leaked the name of a CIA officer? I'll talk about the case with a key player.

(COMMERCIAL BREAK)

HENRY: This just in to CNN: We're getting live video from near Orlando, Florida, where a church van has had an accident. One child is dead and several others are injured after this child care center's van overturned Wednesday afternoon in Lake County, Florida. It happened near State Road 40 and Highway 445-A. These are live pictures right now, you can see, of the rescue effort. This is south as Astor, as I mentioned, near the Lake County line. Two helicopters have been dispatched to the scene of the accident to try to transport other injured children. As I mentioned, one child is already dead.

This is near Orlando, Florida. Those are live pictures of the rescue effort. We will bring you more information and more pictures as they come in. Now let's go back to break. INSIDE POLITICS will be back in just a moment.

(COMMERCIAL BREAK)

HENRY: Congresswoman Jane Harman of California is the ranking Democrat on the House Intelligence Committee. She joins me now live from Capitol Hill to share her thoughts on the president's speech and other issues.

Congressman, thanks for joining us. And I want to start asking you -- I assume you do not think the president made the case, but did he at least make a positive step or two in the right direction last night?

REP. JANE HARMAN, (D) CALIFORNIA: Well, a pep talk is not a plan. I think he missed a big opportunity. Obviously, the military in the audience wanted, I think, to hear something more specific. So did their families. So did I. And so did millions of Arabs and Muslims, especially Iraqis, around the world. And he could have said and didn't much more specifically how we're going to help the Iraqi experiment succeed, how we're going to train, rapidly, the Iraqi security forces, and then make it absolutely crystal clear that once that happens, the American presence will withdraw totally.

HENRY: OK, well, then, since you don't feel the president laid out that plan, lay out what you think Democrats would do differently. There's been a lot of talk about how there's not a Democratic plan on the table. And in fact today in the "Los Angeles Times," Ron Brownstein wrote that one of the reasons why there is a public appetite to continue this troop deployment is not necessarily that the president has made the case, but that there's not a reasonable alternative out there. What would Democrats do differently?

HARMAN: Well, Democrats that I know of, even the House leader Nancy Pelosi, are talking about the need for a strategy for success. That would be many of the things I just said, plus the identification of benchmarks that would give us a way to know whether we're getting to the end of this. I'm not for a timetable for withdrawal. I agree with the president. That just emboldens the insurgents. But I am for a process where we can measure how we're doing, just like any other process that would be set out, for example, in a company, in an educational curriculum.

HENRY: OK, let's zero in on what the president said where he was -- appeared to be linking 9/11 to the war in Iraq. You're somebody, as the top Democrat in the intelligence committee, you've investigated 9/11, whether or not there were any links to Iraq. Tell us what the facts are.

HARMAN: The facts are, there were no links. There was no operational relationship. There were occasional conversations, but the intelligence is clear on that. It wasn't clear on much else. There were no operational links and just keep -- continuing to repeat that there were -- eight references last night -- doesn't mean that there were.

HENRY: OK, but isn't the president's broader point that Iraq is part of a global war on terror and it's better to confront these terrorists in Baghdad than in Los Angeles, in your home state?

HARMAN: You bet. But as a piece that you just showed five minutes ago said, they weren't in Baghdad before the military action. So what we really need to confront is, yes, an era of terror -- I don't think the war analogy really fits anymore -- and some of the mistakes we've made. The post-war planning mistakes in Iraq and figure out a series of benchmarks that will get us to a trained security force in Iraq, a constitution to developed by Iraqis and the inclusion of the Sunnis in an ethnically diverse government.

HENRY: OK, Congresswoman, I have about 30 seconds. I want to ask you -- today the president announced a major restructuring of intelligence gathering. He accepted 70 of the 74 recommendations of his WMD commission, the key being creating a new national security service within the FBI. Good idea or bad?

HARMAN: Very good idea. So is the counterproliferation center, so is increased investment in what we call human intelligence across the intelligence community. Very good job today. Still a little to do. But sustained focus on helping the director of national intelligence succeed will mean better intelligence, which hopefully will mean better policy.

HENRY: OK, let's end it on a positive bipartisan note, then.

HARMAN: Thank you.

HENRY: Congressman Harman, thank you for joining us.

We'll hear a Republican point of view a little later when I talk a Republican senator, Sam Brownback, of Kansas. But straight ahead, Katherine Harris wants to be a senator. But first, she may have to overcome opposition from within her own party. The inside scoop when INSIDE POLITICS returns. (COMMERCIAL BREAK)

HENRY: Two reporters facing possible jail time are expected to attend a hearing at the top of the hour at U.S. District Court here in Washington. Matthew Cooper of "Time" magazine and Judith Miller of "The New York Times" both face possible 18-month sentences for refusing to cooperate with a Grand Jury investigating the leak of a CIA agent's identity. Cooper and Miller asked for today's hearing after the Supreme Court earlier this week refused to hear their appeals.

Columnist and CNN political analyst Bob Novak was the first to reveal the CIA employee's identity, Valerie Plame. And Bob Novak joins me now on the show.

Bob, first, what's your reaction to the Supreme Court saying they would not hear this case?

BOB NOVAK, CNN POLITICAL ANALYST: Well, I deplore the thought of reporters -- I've been a reporter all my life -- going to jail for any period of time for not revealing sources, and there needs to be a federal shield law preventing that as there are shield laws in 49 out of 50 states. But, Ed, I -- my lawyer said I cannot answer any specific questions about this case until it is resolved, which I hope is very soon.

HENRY: In general, though, you believe in the principle of keeping the identity secret,of confidential sources. Have you ever revealed the identity of one of your confidential sources?

NOVAK: Well, people know -- who have read my column know there have been special case where I have. But the question of being coerced to by the government and being put in prison is, I think, something that should be protected by act of Congress.

HENRY: In general, have you cooperated with investigators in this case?

NOVAK: I can't answer any questions about this case at all.

HENRY: Okay. Now, just in general about the principle at stake here -- William Safire, fellow conservative, wrote an op ed in the New York Times saying that at the very least, he believes that you owe your readers, and in this case, your viewers, some explanation. He said, "Mr. Novak should finally write the column he owes readers and colleagues perhaps explaining how his two sources, who may have truthfully revealed themselves to investigators, managed to get the prosecutor off his back."

I think that's the question. Why sit that there are two reporters out there who may go to jail, Bob, but it doesn't appear that you are going to go to jail?

NOVAK: Well, that's what I can't reveal until this case is finished. I hope it is finished soon. And when it does, I agree with Mr. Safire, I will reveal all in a column and on the air. HENRY: Do you understand why in general there's frustration among fellow journalist after 41 years of distinguished work, where you've always pushed and been a fierce advocate of the public's right to know, you're not letting the public know about such a critical case, and two people may go to jail.

NOVAK: Well, they are not going to jail because of me. Whether I answer your questions or not, it has nothing to do with that. That's very ridiculous to think that I am the cause of their going to jail. I don't think they should be going to jail.

HENRY: Yes. But I didn't say you were the cause. But there are some people...

NOVAK: Yes, you do did.

HENRY: No, but some people feel if you would come forward with the information that you have, that maybe they would not go to jail.

NOVAK: But you don't know -- Ed, you don't know anything about the case. And those people who say that don't know anything about the case. And unfortunately, as somebody who likes to write, I'd like to say a lot about the case, but because of my attorney's advice I can't. But I will. And there might be some surprising things.

HENRY: We'll all be waiting to hear that story finally told, Bob.

Now I want to talk to you a little bit about what's in your notebook. Obviously, the president pushing very hard for CAFTA, the Central American Free Trade Agreement. But he's facing a very bumpy road. But you're hearing that there's been a sweetener added to the deal for some lobbyists.

NOVAK: Well, it came through the Senate Finance Committee by a voice vote -- a voice vote -- no opposition. And the word is that the secretary of Agriculture, Mike Johanns, was up on the Hill, and what he gave was some of the sugar money going into ethanol. That gets a couple of big lobbies, the ethanol lobby and the sugar lobby. The sugar lobbyists say theirs nothing that'll make them support the bill, but it did go through without objection in the Senate Finance Committee.

It's going to pass the Senate easily -- tougher row in the House of Representatives.

HENRY: Okay, what about "labor pains" right now for Democrats? There's a lot of trouble for Democrats among organized labor.

NOVAK: There's a new organization called Change that is anti- John Sweeney, AFL-CIO president. The Teamsters and the SEIU's workers are involved in that. But what's interesting is, it looks like as though the carpenters are going to join this group. And the big news is that the National Education Association may join the rebel group. So there may be a whole new labor organization coming out in opposition to the AFL-CIO. HENRY: Seems like at a time when Democrats are out of power, the last thing they could use would be the splintering within their own ranks.

NOVAK: And this new organization's going to put emphasis on organizing, rather than politics.

HENRY: Okay, finally, Congresswoman Katherine Harris: well- known, former Florida secretary of state during the contested 2000 election. She's planning a run for Senate, she's running against a Democrat who's vulnerable -- Bill Nelson. But now you're hearing there's some static from the White House.

NOVAK: Yes, there's some static from the White House, from the National Committee, from the State organization with Governor Jeb Bush -- they don't want her to run because they don't think she is the Republican who'll beat Bill Nelson. But she is almost impossible to defeat in a primary. What they would like to do is dry up her money so she backs out. But she's a pretty tough lady.

The candidate that they're trying to push is the speaker of the House of Representatives in Florida, Allan Bense. Nobody knows him. You don't -- you may never have heard of him till this minute. But that -- they think that Katherine Harris is a primary winner and a general election loser. But she's a tough lady. I don't know if she's going to be forced out and intimidated by this pressure from the party establishment.

HENRY: A lot of political intrigue in the Sunshine State. You obviously have good sources on that. Are you going to tell me who told you that?

NOVAK: Never.

HENRY: All right. Bob Novak, not revealing his sources.

Some Democrats are accusing President Bush of creating a crisis for America's war veterans because he has been so focused on the conflict in Iraq. We'll have the latest on that line of criticism in response to the president's speech on Iraq.

Plus, has Mr. Bush paid too little attention to his campaign to overhaul Social Security? Our Bill Schneider has been going over some new and interesting poll numbers. More INSIDE POLITICS straight ahead.

(COMMERCIAL BREAK)

HENRY: As the markets get set to close on Wall Street, I'm joined now by Kitty Pilgrim in New York with "The Dobbs Report" -- Kitty.

(MARKET REPORT)

KITTY PILGRIM, CNN CORRESPONDENT: Coming up on CNN at 6:00 p.m. Eastern on "LOU DOBBS TONIGHT" "Broken Borders," illegal immigration actually spiked following the president's speech earlier this year about a guest worker program. We have a report on why.

(BEGIN VIDEO CLIP)

CHRISTOPHER FARRELL, JUDICIAL WATCH: The president's proposal resulted in an increase in illegal crossings and that 45 percent of those folks showed up, or came here to the United States, based upon this perception of an amnesty program.

(END VIDEO CLIP)

PILGRIM: Also tonight, should Congress get a pay raise? Well, plenty of representatives say yes. We'll take a look.

Congressman Duncan Hunter joins us to discuss his concerns about the proposed sale of Unocal to a Chinese oil company.

The Bush administration agreed today to ask Congress for more money to meet veterans' health care expenses. This comes after last week's disclosure that the program is at least $1 billion short. Democrats have been laying the blame at the door of the White House. And the president's Iraq speech last night did not soften their criticism.

JOE JOHNS, CNN CONGRESSIONAL CORRESPONDENT: Ed, some Democrats are saying, essentially, they don't like the idea that this Republican administration has hid the ball on the issue of veterans' benefits. Some Republicans on Capitol Hill saying they were blind-sighted. They're angry now that they have to rush through a $1.5 billion increase in veterans' health care.

Now, some veterans say the administration hung them out to dry by taking so long to even warn them that there was a problem. The secretary of Veterans Affairs on Capitol Hill today explaining that it was just a miscalculation.

(BEGIN VIDEO CLIP)

JIM NICHOLSON, VETERANS' AFFAIRS SECRETARY: In the '05 budget that we're talking about now was put together, the '02 data was reflective. And Operation Iraqi Freedom" was not even ongoing. So obviously, the world has changed.

(END VIDEO CLIP)

JOHNS: Now, this is just before the July 4th break. And members of both parties are saying no one wants to go home and ride in the parade with an issue like this hanging out there.

Democrats, of course, are hitting the issue very hard. They're accusing Republicans, essentially, of ignoring warnings that there was a problem with veterans' money from the beginning. Senator Rockefeller talking about that earlier today.

We don't have that. Among the most upset Republican senators is Senator Rick Santorum of Pennsylvania who's up for reelection next time around. He will be offering an amendment that gets the final dollar figure up to $1.5 billion this afternoon.

He's also fired off a very tough letter to the secretary of the Veterans Administration. That letter went out on Friday. In part, he says, "I'm disappointed that the department was not more forthcoming about these financial constraints. Had the department been candid and transparent in its assessment of financial needs during the current year, the outcome of a recent Senate vote might have been very different."

Democrats, of course, have pounced on Santorum. He is up for reelection. The Democratic Senate Campaign Committee today accusing him of scrambling to try to, quote, "cover up a vote" against increasing money for the VA -- Ed?

HENRY: So a rare spat among some powerful Republican senators in the White House on that issue.

I want to shift gears, though, to the House side of the Capitol where we're hearing a possibility -- you've been getting word of a possible deal within the House Ethics Committee to get that panel restarted. That might lead to investigations -- it's been stalemated -- but maybe lead to investigations of Tom DeLay and possibly some Democrats, as well.

JOHNS: That's certainly right, Ed. There is some optimism now that they will be able to get an agreement on going forward. As you know, there has been an issue on the House Ethics Committee as to whether the Republican chairman of the committee could appoint a Republican, essentially, to control the investigations of the committee.

Democrats have been pushing very hard to try to get someone who is nonpartisan to do that particular job. We're hearing there is a possibility something will get done on that. Of course, the critical issue is, after they get Ethics up and running again, whether they will move very quickly to the issue of investigating the foreign travel of House Majority Leader Tom DeLay.

HENRY: OK. Joe Johns at the Capitol, thank you very much.

An update now on an investigation of one congressman from California. The Associated Press reports that a federal grand jury has subpoenaed documents from Republican Randy "Duke" Cunningham related to the sale of his home. Cunningham sold the house to a defense contractor who quickly put it back on the market and later sold it at a loss of about $700,000. That raised eyebrows in large part because Cunningham is a member of the House Appropriation Subcommittee that handles defense contracts. Cunningham denies any wrongdoing.

Now, House Republicans today held a closed door meeting on Social Security reform. They later told reporters that talks were, quote, "very candid and very positive." And they took the opportunity to again accuse Democrats of doing absolutely nothing to protect the Social Security program.

But as our senior political analyst, Bill Schneider, explains, new polls suggest the president and his party still are not getting any traction on this issue.

(BEGIN VIDEO CLIP)

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): President Bush has spoken about his idea to allow workers to put some Social Security tax money in private accounts at least 36 times this year. He has visited 28 states and the District of Columbia.

What has the president gotten for all the attention to Social Security? Not much. In January, 41 percent of the public approved of the way President Bush was handling Social Security. By June, Bush's approval rating on Social Security had dropped 10 points to 31 percent. Democrats have kept a united front.

SEN. HARRY REID (D-NV), SENATE MINORITY LEADER: Democrats in the Congress won't back down, and the American people will not. United we stand to protect Social Security.

SCHNEIDER: President Bush defends his plan for private Social Security accounts in terms of generational interests.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: If you're a younger American, you need to pay attention to this issue. I think this is a generational issue. Grandmothers and granddads have nothing to worry about. Their grandchildren have got a lot to worry about.

SCHNEIDER: Younger workers have been relatively open to the president's ideas. Forty-two percent of adults under 30 approved of President Bush's handling of Social Security in January while half disapproved. Six months later, their support is about the same.

But look at what's happened to support for the president's Social Security ideas among workers in their prime earning years, down 13 points among Americans aged 30-49, down 15 points among Americans 50- 64 years old. The more the president has talked about Social Security, the more he has turned off workers in their middle years.

He never had seniors to begin with, despite his assurances that nothing would change for current retirees. Seniors' approval dropped from 37 to 30.

Look at the generational differences in January and June, and you can see what happened. Six months ago, people between 30 and 64 were similar to younger workers in their response to the president's Social Security ideas, relatively open. By June, people between 30 and 64 had joined forces with seniors, strongly opposed to what President Bush wants to do.

(END VIDEOTAPE)

SCHNEIDER: The prospects for the president's Social Security ideas now look pretty bleak. According to the Associated Press, Senator Gordon Smith, a Republican on the Senate Finance Committee, said yesterday, quote, "People are talking but nothing's moving." The committee chairman, Charles Grassley, said about his fellow senators, "Nobody really talks too much about Social Security. They all want it to go away." And then he added, "I'm not going to let it go away."

HENRY: Bill, what about the poll numbers though? What are they saying about the sense of crisis among the public? That was a key part of this debate at the beginning, where the president was trying to say, "It clearly is in crisis. It may be heading towards bankruptcy." Democratic leaders have insisted, "No, that's wrong." What is the public saying?

SCHNEIDER: The public says they don't see a crisis. And in fact, the number of people who say that Social Security has either a crisis or a serious problem, major problems, has gone down since the beginning of the year. So that's also a case the president has failed to make.

HENRY: OK, Bill Schneider, that's making it even more of an uphill climb for the president. Bill Schneider, thank you.

Now, we have some new information about the status of military recruitments, some positive news at the Pentagon. Here's our senior Pentagon correspondent, Jamie McIntyre -- Jamie?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, Ed, remember when the Army said that they thought the surge of students graduating from high school this summer would help make up those recruiting losses that they've been suffering so far? Well, one month does not a trend make, but for the month of June, the Army has exceeded recruiting goals after missing it for four months in a row. In fact, they've exceeded it by almost 500 prospective recruits.

The Army had asked for a goal -- were shooting for 5,600 recruits. They got 6,100. That's about 500 more than they expected. The Army Reserve, also, which has been really lagging, has exceeded its goals by a little bit less, 3,651 compared to 3,610, was what they were shooting for.

But again, this is just one month. The Army is still roughly 8,000 recruits behind for its year-end goal of 80,000 new recruits for the Army at the end of the year. And again, recruiters are hoping that, over the summer, they'll be able to make up some of those deficits -- Ed?

HENRY: Thank you, Jamie McIntyre at the Pentagon.

The president, obviously, also made a very strong pitch last night. We'll have to see where the numbers head after that.

The reviews of President Bush's speech on Iraq still are coming in. Up next, a Republican defense of Mr. Bush's call to finish the mission. I'll talk to Senator Sam Brownback of Kansas.

Also ahead, Katie Holmes may love him, but Tom Cruise apparently has ticked off a member of Congress.

And when we go inside the blogs, we'll find out if online pundits are staying the course after the president's Iraq speech.

(COMMERCIAL BREAK)

HENRY: Earlier in the program, I discussed the president's Iraq speech with a leading house Democrat. With me now live from Capitol Hill to offer a Republican perspective on Iraq and other topics is Senator Sam Brownback of Kansas.

Welcome, Senator.

SEN. SAM BROWNBACK (R), KANSAS: Thank you, Ed. Good to join you.

HENRY: Thank you.

The president made it clear last night this is tough work. He didn't sugarcoat it at all. Do you think it's good that it appears the White House is rejecting what Vice President Cheney had been saying about the insurgency being in its last throes? Are they finally being direct and saying, "It's not going to be easy"?

BROWNBACK: Well, I think it's very clear -- and it's been very clear from the outset -- that this is not going to be easy and that what the president said last night, and what the vice president has said about the difficulties and the insurgency, are both very consistent and accurate.

This is tough work. This is tough sledding. It needs to be regularly taken to the American public and said, "Here's where we are. Here's what's taking place. Here's the progress that's been made. And here's what's yet to be done."

I think the president laid that out. And yet, also, others are saying to the American public, "We've got a difficult insurgency that's on our hands. We're dealing with it. The Iraqis are increasingly dealing with it. But we've got a long ways yet to go."

HENRY: Now, what do you say to Democratic charges that the president went overboard by tying 9/11 to Iraq? Do you feel it was out of bounds or not?

BROWNBACK: I don't think it's out of bounds, particularly -- I think really you can go back to 10 years prior to 9/11 and see this terrorist insurgency, this real militantized Islam growing in force and attacking us at embassies in Africa and the USS Cole, building, and building, and building, until we saw what took place at 9/11. And then since 9/11, we have been aggressively responding to that building that had been taking place for 10 years prior.

HENRY: Now, what about the Democratic charge out there today that this is the president's third rationale for war in Iraq, that he started out on WMD? They were not found. He shifted to creating more democracy, spreading democracy through the Mideast, and now he's focusing on Iraq being a hot bed for terrorism. Fair charge?

BROWNBACK: Well, I think you can clearly make the charge -- and it's very, very clear to date -- we have not found weapons of mass destruction. We've looked all over. I hope, at some point in time, that we will find them someplace, because that was one of the basis for the war.

It was the intelligence report before we went into the war, from all major intelligence agencies, that it was weapons of mass destruction were there. But they're not.

And I think one of the key things that the president is saying to the American public, to all of us right now, is, "We cannot abandon this effort." That the military itself is saying, "What is the body public going to do?"

And the foreign people that are attacking us, the militant terrorists that are attacking us, know that the weak part of our military is U.S. public opinion. Will we stay the course and see this on through? And the president's saying, "We have to, if for no other reason that we see through what we do, and it is clear that we need to do this to support our military."

HENRY: Senator, you also sit on the Judiciary Committee, which would handle any confirmation hearings, if there are Supreme Court retirements. What kind of intelligence, tea leaf reading are you getting right now? Have there been any consultations with the White House about possible picks?

BROWNBACK: I've not received any consultation, and I don't think they're going to be consulting with many people because this is such an extraordinary hot issue, even with these recent cases that have come out within the last seven days.

The impact of the Supreme Court on this nation is profound. So there's not going to be any consultations prior to any sort of statement of a stepping down from the court. Then they'll begin a process afterwards where there will be a good discussion, and it needs to take place, but not before.

HENRY: What about the 2008 presidential campaign? We all know that you're testing the waters. How's the water so far?

BROWNBACK: You know, it's quite good. It's a long ways out. And many things will happen between now and then.

But a lot of people are very interested in the topics that I'm putting forward, that we need to renew the American culture and support the American family, that we have to have a robust foreign policy. Those are things that really strike at the chord of what most people want to see develop, and grow, and improve in this nation.

HENRY: OK. Senator Sam Brownback, we'll have to leave it right. Thank you very much for joining us today. Really appreciate it.

BROWNBACK: Thank you.

HENRY: Thank you.

Now news about two potential presidential candidates in 2008, other than Senator Brownback. That leads off our "Political Bytes."

Massachusetts GOP Governor Mitt Romney has named his wife, Ann, to serve as a liaison to the state's faith-based social service groups. Ann Romney's main duty will be to land federal grants for the groups. Some state Democrats argue the move is just the latest by Governor Romney to appeal to his party's conservative wing as he considers a run for the White House.

Also, Democratic Senator Joe Biden has created a new political action committee he's calling Unite Our States. In a statement, Biden said the PAC will be used to elect Democratic candidates who will offer a unifying agenda. The PAC will also promote Biden's own speeches and policy statements.

Out west in California, a new poll finds more erosion in public support for Governor Arnold Schwarzenegger. The Field Poll finds that 39 percent of registered voters are inclined to vote Schwarzenegger next year, while 57 percent say they are not inclined. As recently as February, the numbers were almost reversed. Back then, 56 percent said they were inclined to vote for him again, while 42 percent said they were not.

And in New York, Republican attorney Ed Cox today announced the members of his U.S. Senate exploratory committee. Cox, whose wife, Tricia, is a daughter of the late president, Richard Nixon, is considering a race against Democrat Hillary Clinton. In remarks to reporters today, he was not shy about criticizing his potential opponent.

(BEGIN VIDEO CLIP)

ED COX (R), CANDIDATE FOR U.S. SENATE: She parachuted into New York solely for the reason running for the Senate, and now she's running for the presidency. Now, how can she focus of the problems of New York? And she's really thinking of running for the presidency. She is more concerned about the polls in Iowa and New Hampshire than the priorities of the people of New York.

(END VIDEO CLIP)

HENRY: Ed Cox will be a guest right here on INSIDE POLITICS tomorrow.

President Bush's speech on Iraq has got the blogosphere buzzing today. Straight ahead, we'll go "Inside the Blogs" to find out what's being said on both sides. (COMMERCIAL BREAK)

HENRY: Bloggers are, of course, weighing in today on President Bush's big speech on Iraq. We check in now with CNN political producer Abbi Tatton and Jacki Schechner, our blog reporter -- Jacki?

JACKI SCHECHNER, BLOG REPORTER: Hi, Ed. No surprise that President Bush's speech is a big topic today. But we had mentioned yesterday that some people were going to be live-blogging. And we figured we'd take this opportunity to tell you and to show you what exactly that means.

Over at captainsquartersblog.com on the right, he was following along with what the president was saying. And we would say that he was giving a play-by-play, almost as if you weren't watching. He told you what the audience looked like. He told you what President Bush looked like. He had some quotes, but mostly he had summaries of what he thought the main points were.

Down at the bottom, Captain Ed goes on to say he thought that the president did a nice job, but says he missed out on some big opportunities. Also, wanted to mention that he pundit-blogged. He stayed tuned to the news coverage and told you what the pundits were saying after the fact.

ABBI TATTON, POLITICAL PRODUCER: Live-blogging on the other side of the aisle is Thinkprogress.org. We mentioned them yesterday, as well. They have a snazzy new site here today.

They took a whole different approach to the live-blogging. They were watching along with the president, but they were doing this fact- checking rapid response to all the remarks. If President Bush said, "In the past year, we've made significant progress," they went back and gave you facts to prove why this isn't true.

So different approaches to the live-blogging. But also, we should mention that these two blogs are very different, not just one on the left and one on the right. Captainsquartersblog is run by one individual blogger, Ed Morrissey, out in Minnesota. Thinkprogress is an arm of the Center for American Progress -- or "progress," as you like to say over here -- that employs a few people that do various tasks, and blogging is one of them. So these blogs come in very many different shapes and forms.

SCHECHNER: The details are in the accent.

We wanted to go back over to polipundit.com. This is Lorie Byrd, who's in North Carolina. Her husband's a Marine Corps vet. So she's very much interested in what President Bush had to say.

Also pointed out yesterday seven points she wanted the president to make and we had taken a look at those. We went back to see how well he did. And she points out -- and we noticed, too -- he hit on, if not all of them, most of the seven points that she had. Also, she goes on to say that she wonders if this is a good or a bad thing, because if he was that predictable, the speech might not have had the impact it could have had, had it been less predictable.

TATTON: Some on the left are picking up on the numbers of times Bush mentioned various different things, 9/11 being one of them. Ezraklein.typepad.com was one of them doing this. He noted that September 11th was mentioned six times. Weapons of mass destruction, in relation to Iraq, not mentioned at all. A breakdown of all the numbers there at Ezraklein.typepad.com.

SCHECHNER: Also wanted to get some military response to the speech. Froggyruminations.blogspot.com, this is Matthew Heidt, a Navy SEAL Corpsman, and he thought it was an excellent speech. He gave it a glowing review, calling it Leadership 101. It was a good example of leadership, strategic vision, and confident discipline. Also saying it's kind of disappointing that the president had to give the speech in the first place.

TATTON: So the speech was a big topic of conversation in the blogosphere. It's also front-and-center on many newspapers across the country. Over at Daily Kos today, we found a link to this great side, newseum.org, that allows you to look at the front pages of local newspapers all across the country. It really is very cool here.

And we went across here to San Diego, the "San Diego Union Tribune." You see the Bush speech up there on the front page above the fold and also a story about Congressman Randy "Duke" Cunningham who we have, yes, mentioned here before. He is under scrutiny in the blogosphere currently over a controversial house sale to a defense contractor that has a federal grand jury interested. And also bloggers referring to the eight-term congressman as "Cunningscam."

SCHECHNER: I love those point-and-click news tools. They're great.

Talkingpointsmemo.com, Josh Marshall has been following this. And now his readers are following it very diligently as well, sending him information and the updates on the story as it unfolds. They are linking back to the "San Diego Union Tribune."

TATTON: One of the readers of Talking Points Memo has gone out and done some sightseeing on the real estate market. Suddenly, the bloggers are interested in the real estate around San Diego. This is at kimmccall.org, telling you what it's like to own a property over $2 million on some of them, taking photos, and showing you what it's like to live out there around Congressman Cunningham -- Ed?

HENRY: We'll be back in a little while to Jacki and Abbi. Maybe they'll have some more real estate ideas for us, among other things in the blogosphere.

Tom Cruise's "War of the Worlds" opens in theaters today, as his comments about psychiatry spark a war of words. In a recent television interview, Cruise called psychiatry a pseudoscience and he criticized actress Brooke Shields for revealing that she had taken an antidepressant.

Now Cruise is catching some flack on Capitol Hill. The Congressional Mental Health Caucus says Cruise is reinforcing negative perceptions. Congressman Tim Murphy of Pennsylvania, co-chair of that caucus, takes issue with Cruise's apparent belief that attitude adjustment can overcome mental illness. Murphy says, quote, "If this was the case, mental illness would have been cured during the time of the Salem Witch trials."

Strong reaction to President Bush's "stay the course" speech on Iraq. Democrats accuse the president of not having enough U.S. troops on the ground, and they accuse him of again trying to link the war in Iraq to the 9/11 terrorist attacks. We'll talk about it, coming up in our "Strategy Session."

(COMMERCIAL BREAK)

HENRY: President Bush delivered his "finish the mission" speech on Iraq in front of a military audience. But some servicemen and women are not cheering his policy. Our chief national correspondent, John King, spoke with an Iraq War veteran who's taking his concerns about administration policy onto the campaign trail.

KING (voice-over): The small crowds tell you it's summer, and that Paul Hackett is the underdog, a Democrat running for Congress in Republican territory. A marine just back from Iraq who says it is time for the president to tell it straight.

HACKETT: If you overplay the success and then as the word gets out exactly what's going on, then it looks like politicians aren't being honest with us.

KING: Hackett saw duty in Fallujah and Ramadi, was discharged in March, and plunged into a special election for a vacant congressional seat in Southern Ohio. He calls himself an amateur politician, but doesn't hesitate to suggest why support for the president's handling of Iraq is in decline.

HACKETT: That's the problem, the disconnect. Whoa, whoa, whoa. You told us a year-and-a-half ago mission accomplished. It's a hell of a lot worse there today.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Good evening.

KING: The president's decision to speak to the nation in prime- time surrounded by troops at Ft. Bragg, North Carolina is part of an urgent White House effort to rebuild support.

SCOTT REED, REPUBLICAN STRATEGIST: In the last 60 days, there has been a steady drip, drip, drip of bad news coming out of Iraq every night, coming into your living room every night when you talk about this at your dinner table with your family, Republicans and Democrats are nervous. KING: Senior bush aides insist the problem is one of communication, not policy. Time spent on Social Security, for example, the White House says allowed Iraq policy critics more say.

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: The fact of the matter is the towns had a lot of people in it who are arm chair quarterbacks or who like to comment on the passing scene.

KING: So one element is to be more aggressive in answering the critics. But the administration is also recalibrating its message. Gone, talk from the vice president about an insurgency in its last throes. Now the defense secretary soberly warns the fighting could last years.

HACKETT: The American people want to have confidence in their leadership. They want to believe in their leadership. I think that's the challenge that President Bush has.

KING: Ohio's second congressional district is small town conservative country. The president won 64 percent of the vote here. And Republican candidate Jean Schmidt dismisses any talk of wavering support for the war.

JEAN SCHMIDT, (R) OHIO CONGRESSIONAL CANDIDATE: Southern Ohio believes in this president as I do and his agenda, especially his agenda with this war.

KING: It's true searching for votes here can be lonely work for a Democrat. But in the basement of a county courthouse, Hackett is told of a Republican convert.

UNIDENTIFIED MALE: So opposed to the war in Iraq that he was going to vote Democratic this time.

HACKETT: Bless him.

KING: Jay Purdy did a tour with the Marines in Vietnam. A Christian conservative and two-time Bush voter disillusioned over Iraq.

JAY PURDY, 2ND DISTRICT VOTER: It's appearing to me that it's kind of make it up as we go. And I don't know that that's a good plan for a military action.

KING: Summer seems more a time for baseball than big presidential speeches. This one necessary though, because even in places where patriotism runs deep, support for the troops doesn't mean there aren't questions for the commander in chief.

John King, CNN, Ripley, Ohio.

(END VIDEOTAPE)

HENRY: We'll turn to our strategy session in a few moments. But straight ahead, bloggers weigh in on the two reporters, Judith Miller and Matthew Cooper who face possible jail time for refusing to reveal their sources.

(COMMERCIAL BREAK)

HENRY: There are developments in the case of Matthew Cooper of "Time" magazine and also Judith Miller of "The New York Times." It's happening at the courthouse. We're going to there in just a moment. But right now, we want to go to the blogosphere and hear what's been going on. Jacki Schechner and Abbi Tatton, what are they saying?

JACKI SCHECHNER, CNN BLOG CORRESPONDENT: Hi, Ed. They've been talking about this all day with anticipation finding out what is going to happen to Matthew Cooper of "Time" and Judith Miller of "The New York Times, right?

And what they're talking about on the Huffingtonpost.Com. this is Walter Shapiro weighing in. He's a friend of theirs. And he admits that. And he, obviously, has some bias in that regard. But he doesn't think they did anything wrong. And he does say that Bob Novak owes an explanation as to why he is in the position he is. And they are now facing jail time. Goes on to talk about his relationship with them hoping that sanity will prevail in the long run.

ABBI TATTON, CNN POLITICAL PRODUCER: And this has a lot of D.C. bloggers talking. The normally light-hearted Anna Marie Cox over at Wonkette.com got serious this morning when she posted on what she calls "The Matt and Judy Show." Taking to task Robert Novak and Karl Rove on this case. She's convinced that Karl Rove is behind this.

More discussion over at the Washingtonmonthly.com. This is Kevin Drum who as a result of this case has been arguing for a federal shield law that would protect journalists from revealing their sources. And he's saying that he's getting a lot of resistance in the blogosphere for proposing such a law. And one of the reasons is because of this -- this is one of the arguments bloggers are saying against this. If reporters get a special privilege, courts will have to decide who counts as a reporter and they'll probably exclude bloggers yet again. That's a big argument in the blogosphere -- are bloggers journalists?

SCHECHNER: And we're going to mention the FEC hearings again in just a moment. That is an issue that they've been addressing there, is how to deal with that.

Interesting post we found today from an Australian blogger. This is Earl Martal. He's an independent consultant in Australia. He delves into the issue of citizen media. And connects the dots back to Judith Miller. An odd fan of her's by the way. But he says that there will be no need for protecting reporters and journalists as citizen media continues to grow, because the barriers are breaking down, because people are out there with their blogs, with their video cameras, with their camera phones, whatever you need to instantaneously give reaction and feedback.

So there will be more outlets for people to provide the watchdog function as opposed to having somebody have to squeal and go to a reporter and the reporter have to protect their sources. This leads us into the FEC hearings that we've been telling you about. In the past couple days, there have been hearings here in Washington. The Federal Elections Commission is deciding what regulation they should have on bloggers.

Duncan Black testifying there today. He is Atrios at Atrios.blogspot.com. And he's been talking about the difference between barrier of entry through main media corporations and through the Internet. Back to you.

HENRY: Thanks, Jacki. We understand there has been a development in this case involving Matt Cooper and Judith Miller. Matt Cooper from "Time" magazine. The judge is giving them until Friday to give their defense. We understand they may be making a statement in a moment or two. We're waiting for them to come to the cameras.

But again, a development in this case. The judge in the CIA leak probe in this case involving the two journalists who have refused to reveal their confidential sources. The judge has decided he is going to give the journalists until Friday to give their defense, gather more information for their defense. In just a moment, we're going to go live to the courthouse with CNN's Kimberly Osias right after this break.

(COMMERCIAL BREAK)

HENRY: Welcome back to INSIDE POLITICS. As we just reported, there's been a development in the case involving journalist Matthew Cooper of "Time" magazine and Judith Miller of the "New York Times." I mentioned that they may be coming to the camera. So, far they've walked past them. They have not made a statement themselves, but CNN's Kimberly Osias is live outside the courthouse.

Kimberly, update us on what has happened today.

KIMBERLY OSIAS, CNN CORRESPONDENT: Well, Ed, exactly as you said: No comment from any of the key players. However, it lasted about 30 minutes in the courtroom. The judge, the U.S. district judge was very succinct in saying that -- saying essentially that court orders need to be followed. He quoted famous author Lewis Carroll who wrote, of course, "Alice in Wonderland" and "Through the Looking Glass," saying just as the Walrus said, "The time has come, the time has come to make a decision."

And basically, what is going on here, there are 48 hours -- 48 hours to -- essentially for the two reporters to ruminate, to decide if they will, in fact, cooperate with the grand jury investigation into the leak of the name of CIA operative Valerie Plame. Heretofore, they have not cooperated and through their attorneys they said they were still not cooperating.

But essentially, that 48 hours buys attorneys some time to get their best effort out there. The attorney for "Time" magazine saying that they wanted to do everything right. They really wanted to dot their Is and cross their Ts, making sure there was nothing that they could do, really re-examining, re-hashing this evidence, making sure that reporters really don't go to jail unnecessarily.

Also, one of the defense attorneys saying essentially these two individuals had done nothing wrong, that they had really been caught in the crosshairs -- caught in, he said, which was a perfect storm. Then, there will be a final hearing on Wednesday, July 6th, as to what happens next in terms of possible jail time. And again, Ed, I say possible jail time that these two reporters from "Time" and "The New York Times" could face is about 120 days.

But the clock is ticking down, so it could in fact be less than that because it is the duration of the grand jury trial. Again, these two reporters are accused of contempt of court for failing to reveal their sources. And essentially what's at issue here, are two conflicting constitutional values. The first amendment, really the right to free speech, to protect sources; 49 states right now have shield laws in place. There has been some discussion bandied about federal shield laws and also the issue of whether the prosecutor can pursue the truth and force them to reveal their sources -- Ed?.

HENRY: OK, Kimberly. You were inside the courtroom. Obviously, we all know that Matthew Cooper and Judith Miller under intense pressure right now. They've both spoken about the effect of all this on their families. You were in the courtroom, what is their demeanor right now? How did they look?

OSIAS: Very hard to tell. Of course, we all tried to get a little bit of an inside glance into that. We were all ushered out very, very quickly by the marshals there, by everyone; trying to get us out.

But it seemed to me, that they seemed relatively calm. Of course, one reporter putting her head on the shoulder of her defense attorney, seeming to be pretty strong. And you would imagine, as you said, much, much speculation and scrutiny really for these two individuals.

HENRY: Thank you, Kimberly Osias, live from the courthouse. We'll go back there, if there are more developments in the case.

Now, time for our "Strategy Session" on today's hottest political topics. With us today, CNN Political Analyst Paul Begala and Republican Strategist Alex Castellanos.

Today's topics: Bush's Iraq speech -- reaction is pouring in, not all of it positive: Supreme planning -- advocacy groups and centers gearing up for a rapid response to the next Supreme Court nomination, if it comes; and pay raise -- Congressional salaries are going up, again. Some lawmakers insist though, it's not a pay raise.

Now, critics had harsh words today for President Bush's speech on the war in Iraq. They say the president failed to lay out a clear strategy for success, to win the war and bring U.S. troops back home. And they accused him of exploiting 9/11, something the White House vehemently denies. Most Republicans were strongly supportive of the president. MCCAIN: I think it was an important speech and I think the president did an outstanding job of laying out the situation as it exists. I think we need some success on the ground. I think that this training and equipping of the Iraqi military, as he pointed out, is the key to success.

REP. ROBERT MENENDEZ (D), NEW JERSEY: We saw the president's speech, and clearly, we do not believe that he had outlined for the American people the benchmarks of success that we all want to see, so that America knows how we are moving forward.

HENRY: Alex, obviously, I think you probably believe this was a good first step. But what does the president need to do beyond what he -- give us a quick wrap-up of what you thought about last night, but what does he need to do next, moving forward here?

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: Well, I think what he achieved last night -- I mean if anyone was expecting the president to detail exactly how he was going to defeat the terrorists, especially let the terrorists know, perhaps that would be a bit naive.

But I thought the president was very clear on what has been accomplished, the benchmarks that we've already met: Defeated Saddam Hussein, free elections and a country that's rebuilding, but more importantly, how we're going to get out. And that is, we're going to eliminate a whole bunch of terrorists until the Iraqi defense forces can take over and then they can come home. I thought that was pretty clear.

I thought the Democrat response to this though, seemed to be a little bit over the top to me, in the sense that it almost seems to be: Hey, we support our troops, but not what are troops are doing. It's a little conflicted and I think in time of war like this, people want a little more certainty. That may have been what happened, as a matter of fact, last election, whether it's an effective strategy, I think Kerry was seen as ambiguous like that and Bush was seen as a certain leader. Whenever the president speaks like that, it usually works to his advantage.

PAUL BEGALA, CNN POLITICAL ANALYST: I think the president's very good at winning elections not very good at winning this war and there's an enormous difference. They can't win a war by attacking John Kerry or by attacking Democrats. The president last night, once again, pulled out 9/11, Alex, like a cheap handgun in a bar fight. I checked, I did a little Google search, he's used 9/11 to explain the deficit, tax cuts, his campaign fund raising trips, unemployment, energy policy, Iraq.

It was the first image of the first ad that you made in the campaign and you've organized your convention around 9/11. Now, as Republicans at some point, aren't they worried they're going to overplay this and look like they're politicizing 9/11.

CASTELLANOS: I'm not sure. I think most Americans look at this and they're having a hard time with the Democratic argument that one flavor of terrorist is different than another flavor of terrorists. BEGALA: Are you worried that the president's over playing 9/11.

CASTELLANO: I think the Democratic argument that they just -- these terrorists just happen to be in the neighborhood or --

HENRY: Alex, what about the Republican strategy? Was the president basically dialing back what Vice President Cheney had said about the insurgency being in the last throes?

We didn't hear that.

Hang on one second, let me interrupt quickly.

Matthew Cooper of "Time" magazine is talking outside the courthouse. Let's go there live, right now.

MATTHEW COOPER, TIME MAGAZINE: Well, through my counsel -- and he can repeat what he said in court there, and it stands for me.

UNIDENTIFIED MALE, COOPER COUNSEL: What I told the judge was that at this point, it's Matt's intention to accept the civil sanction that the judge is going to impose, if he does impose it at the hearing Wednesday, and decline to testify. I don't think...

QUESTION: Are you concerned about "Time's" action? I mean, it sounds like they may be on the verging of caving in and giving over documents.

UNIDENTIFIED MALE, COOPER COUNSEL: I think at this point, we don't have anything else to say. We're going to see how the next few days unfold, file our papers.

QUESTION: But if "Time" does release the documents, wouldn't that let Mr. Cooper off the hook?

QUESTION: If nothing changes, do you think he will go to jail on that day or will it be a couple days after that.

QUESTION: Do you think he will go to jail on that day? Or will it be a couple days after that?

UNIDENTIFIED MALE, COOPER COUNSEL: We'll have to see what the judge says.

QUESTION: Matt, do you agree with the fact that "Time" magazine may turn over these documents? Do you agree with their decision as a journalist? Do you agree with it?

COOPER: I would rather they did not, but they have to make their own decision. A corporation is different than a person, different obligations. It's -- you know, it's perfectly you know, I think -- a corporation is different than a citizen, has different obligations I think. I think certainly there's no shame and no dishonor in fighting all the way to the Supreme Court of the United States and complying with a lawful court order.

If that is what "Time" in fact chooses to do. I don't know, that's "Time's" decision. For these purposes we're separate entities. But I want to say, Time has backed me repeatedly to the hilt in a very expensive, long, lengthy legal case that went all the way to the Supreme Court.

You know, on balance, I think I'd prefer they not turn over the documents. But "Time" can make that decision for itself. and I think it's an honorable one whatever they decide.

That's it. Thank you.

QUESTION: Have they made that decision already?

HENRY: Matthew Cooper of "Time" magazine there. He was commenting along with his attorney. The development in this case as earlier this week the Supreme Court had said they would not hear this case. Now the judge in the lower court dealing with it has now given Matthew Cooper of "Time" magazine and Judith Miller of "The New York Times" a deadline of Friday to finally reveal their sources. Otherwise they will go to jail.

You can see Matthew Cooper there, this obviously weighing on him. And it seems there may be some question about whether "Time" magazine is going to be turning over some of the documents in the case. And apparently that may not be the same strategy that Matthew Cooper has.

We will have more developments in this case and we'll going back to it as we get more. For now, we will go to break. And when we come back, we will have the rest of our "Strategy Session."

When is a pay raise not a pay raise? The House has voted to block a move to force an up or down vote on the annual cost of living adjustment for lawmakers. The likely result, their salaries will go up $3,100 to 165,200 bucks a year. The person who was trying to stop this is not amused.

(BEGIN VIDEO CLIP)

REP. JIM MATHESON, (D) UTAH: Now is not the time for members of a Congress to be voting themselves a pay raise. We need to be willing to make sacrifices. We need to behave like American families who make tough choices every day. We need to budget, live within our means and make careful spending decisions based on our more pressing priorities.

(END VIDEO CLIP)

HENRY: Alex, as a Republican strategist, good idea for the Republican led Congress to be raising its salary just a little bit? CASTELLANOS: Well, I think you've seen Republicans and Democrats oppose this. There's a bit of political -- let's say -- mistiming here. At a time of war when there's a deficit is not the best time to grant yourself an automatic pay raise and tell the country that it's already for you to sacrifice, but not necessarily us. So no, not a good move.

BEGALA: I have to agree with Alex on this one. Democrats go to church on Sunday. This weekend they're going to thank God for their spouses and their children and the congressional Republican leadership.

Because this will be a partisan issue. Not a lot of Democrats probably want that pay raise, but the Republicans are pushing this through. And believe me, I guarantee as we say back home, that Democrats will raise this. And they'll link up the pay raise for Congressmen with the defeat of the raise in the minimum wage. And they'll go to Republican districts and they'll say, Congressman Castellanos thinks he's worth 162,000 a year, but you're not worth six bucks an hour.

CASTELLANOS: An, you know, Democrats could, of course, stomp their feet just like they've done on the Bolton nomination and other justices, this like that and oppose this. But Ted Kennedy, interestingly enough, has found the courage to do the politically popular thing here and oppose this.

BEGALA: But unlike the Bolton -- I think you're right, Democrats probably make too much on Bolton. And I don't see it being a political issue. I think they've probably over stepped on that, to tell you the truth. But not on minimum Wage. This affects people's lives, it affects their pocket books, particularly when you're not raising the minimum wage but raising your own pay. I mean, it's just a perfect God's gift to my party. And I want to thank the Lord here on television.

CASTELLANOS: I think this is one of the deficiencies of the Democratic party. Is they always go back -- they reach in their bag of ideas and they pull out the old European idea of the minimum wage, when Republicans are talking about hey, let's get everybody a job so they have the maximum wage. They have nothing.

HENRY: Alex, as a Republican strategist, take a step back, though. I remember back in the early 90s when Democrats were running congress they raised their pay. They had the House bank scandal.

Now Democrats are raising cane, they say the Republicans, Tom DeLay has had ethics troubles. Even though some Democrats also may have taken some of the same trips. But they think there's a perfect storm coming in the next election in the off year.

You know about the six-year itch where the president traditionally in either party after six years in power loses seats in a midterm election. And the president is about to face that. You've got the Iraq situation, Social Security, ethics questions out there and now a pay raise. Is there a perfect storm developing out there for Republican candidate?

CASTELLANOS: I think whom the Gods would destroy, they would first give absolute power, I guess. I think it wise to be careful. But on the big issues that count, you know, Republicans have had a very sensible agenda for the country. And that's keeping the country safe. And so far we have. Try to keep the economy growing. So far they have. I think those are the issues they really care about. Sometimes all the back and forth and inside political ball here in Washington is not their priority.

HENRY: Alex doesn't seem to be that worried. What do you think?

BEGALA: I think the problem is, if that were the agenda that the American people thought Republicans were focusing on they'd be in good shape. But they look at what they're doing. Special bill for the credit card companies. Now they're going to have some special law for the asbestos companies. Now, they're taking the time to raise their own pay.

When are they going to do something about my health care? When are they going to do something about my kids' education? I mean, the problem here is what economist would call opportunity costs. Fairly or not, people think Republicans are focusing on themselves instead of on you.